Genesee & Wyoming Inc. (GWR: Quote), an operator of short line and regional freight railroads, Monday said it has agreed to acquire RailAmerica, Inc. (RA: Quote) for an all cash purchase price of $27.50 per share. On announcement of the deal worth around $1.4 billion, shares of RailAmerica rose about 10 percent in the morning trade.
Genesee expects its earnings per share accretion to be greater than 10 percent in 2013. Genesee estimates that in 2013, RailAmerica will generate revenues of about $650 million and operating income of $150 million, excluding any of its cost savings.
Jack Hellmann, president and CEO of the company said, "The acquisition of RailAmerica by GWI is a straightforward combination of two organizations with overlapping holding company structures and complementary railroad geographies. As a result, the synergies between the companies are expected to be significant, and we anticipate unlocking significant shareholder value."
The purchase price represents a premium of 10.6 percent over the closing stock price as of July 20, the last trading day prior to this announcement. It also represents a premium of 27.6 percent over the closing stock price as of May 21, the last trading day prior to the date on which RailAmerica announced that it was exploring strategic alternatives.
Genesee expects to close the transaction into a voting trust as early as third quarter of 2012. Full integration of RailAmerica's railroads is expected to be by the fourth quarter of 2012. Upon integration, the company anticipates cost savings to be at least $36 million.
Genesee said it will fund the acquisition and refinancing of its existing debt with about $2.0 billion of new debt and nearly $800 million of equity or equity-linked securities. The company said it has received $2.3 billion of committed debt financing from BofA Merrill Lynch and $800 million of committed equity financing from alternative asset manager, Carlyle Group L.P (CG: Quote).
In April, RailAmerica reported a first quarter net loss of $40.2 million or $0.80 per share, which included $51.9 million or $1.03 per share in refinancing charges. Revenue increased 15 percent from last year.
BofA Merrill Lynch served as financial advisors to Genesee. Simpson Thacher & Bartlett LLP, Steptoe & Johnson LLP and Thorpe Reed & Armstrong, LLP served as legal advisors.
Deutsche Bank Securities served as financial advisors to RailAmerica and Skadden, Arps, Slate, Meagher & Flom LLP and Sidley & Austin served as legal advisors.
GWR is currently trading at $56.16, up 0.32 percent, on the NYSE.
RailAmerica shares are up 9.69 percent at $27.21.
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by RTT Staff Writer
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